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Sinopec (SNP) Likely to Initiate Retail Unit IPO Next Year

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According to recent media reports,China Petroleum and Chemical Corporation , also known as Sinopec, is mulling over initial public offering (IPO) of its retail operations.

It is to be noted that the IPO might help the integrated company garner as much as $10 billion. Sinopec is in discussion with banks for organizing a possible Hong Kong listing by next year.

In 2015, Sinopec had decided to go for a retail unit IPO and had expected to raise proceeds in the range of $5 billion to $10 billion. The company had initially planned to list the retail unit during 2014. It had divested almost 30% interest in Sinopec Marketing for a consideration of $15.5 billion in the same year.

The retail unit of the company comprises over 30,500 fuel stations along with a network of convenience stores. But, what is the reason behind the IPO? Investors should note that the IPO of the retail business primarily reflects the effort by China to reform its struggling state-owned enterprises.

With its head office in Beijing, China, Sinopec is one of the largest petroleum and petrochemical companies in Asia. The company is the second-largest crude oil and natural gas producer, and the largest refiner and marketer of refined petroleum products in China.

However, year to date, Sinopec has failed to surpass the Zacks categorized Emerging Market Integrated industry. During the aforesaid period, the company gained more than 19%, while the broader industry improved as much as 63%.

As a result, the company currently carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy sector include McDermott International, Inc. , Ocean Rig UDW LLC and Suncor Energy Inc. (SU - Free Report) . All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

McDermott beat the Zacks Consensus Estimate in each of the last four quarters with an average earnings surprise of 474.04%.

Ocean Rig also surpassed the Zacks Consensus Estimate all the prior four quarters with an average earnings surprise of 66.39%.

Suncor posted an average earnings surprise of 40.55% for the last four quarters.

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